“Due to Centurion’s role as Centurion Accommodation REIT’s property manager, we anticipate that the additional service income will yield higher margins, which leads us to raise our gross and operating margins by three percentage points (ppts) and four ppts to 81% and 65% in FY2026,” he says in his Oct 17 report.
However, the analyst has lowered his FY2026 and FY2027 revenue estimates by 52% and 48% respectively due to the lower bed count, but offset by the new fee income and the REIT’s distribution per unit (DPU). Yeo’s FY2027 earnings estimate has been lowered by 38%.
“We have a higher cash balance, lower debt and total assets on the REIT’s sale, due to the exit of 14 property assets,” Yeo writes.
That said, the analyst still likes the REIT’s prospects given that Centurion will now take up a new role as the REIT’s dedicated property manager, enabling it to book fee income as part of its revenue moving forward.
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Centurion will recognise 10% of the REIT’s distributable income, 2% of purpose-built workers' accommodation (PBWA) gross revenue, 5% of PBWA’s net property income (NPI), and 4% of purpose-built student accommodation (PBSA) gross revenue, says Yeo.
The analyst estimates the additional fee income to come in at $23 million for FY2026 and $24 million for FY2027, respectively, based on Centurion Accommodation REIT’s forecast in its initial public offering (IPO) prospectus.
Post the spin-off listing, Yeo notes that 19 assets remain within Centurion Corp, which include 13 PBWAs in Singapore and Malaysia, two PBSAs in UK’s Newcastle, one PBWA and two PBSAs in Hong Kong, and one Build-to-Rent (BTR) asset in China.
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Looking ahead, Yeo notes that the company will focus more on property development and making acquisitions with the cash received from the sale of assets.
Centurion, which just acquired land in London to develop a 225-bed PBSA, could look at new markets such as the Middle East for its projects. To Yeo, the company’s growth also rests on the performance of its remaining properties, with better bed and occupancy rates.
That said, Yeo recognises that a failure to report better occupancy and bed rates could pose downside risks to his organic earnings growth estimates.
Yeo’s target price includes a 2% environmental, social and governance (ESG) discount. Centurion’s ESG score of 3.0 out of four is below RHB’s country median score of 3.1.
Shares in Centurion closed 5 cents lower or 3.45% down at $1.40 on Oct 17.
